10 Jul Situations Where You Would Require An Alternative Lender Mortgage
If you have a less than ideal financial history and are worried that there might not be any financing options available to you when the time comes to buy a home, set those concerns aside. While you might not qualify to work with an A lender, there are plenty of B (alternative) lenders who are safe, trustworthy and would be happy to assist you. In fact, alternative lenders such as Home Trust Company and Equitable hold more than 13% of the current Canadian broker market share.
Here are a few scenarios in which you would likely be required to work with an alternative lender:
- You have a low credit score
- You cannot pass a mortgage stress test
- You have a non-traditional income source (tips, a cash-based business, Airbnb income)
- You are self-employed and have many expense deductions with low reported taxable income
Working with a B lender will mean that they are more tolerant of poor credit history, with some of them even willing to accept an application if your score is as low as 500. They also allow expanded debt-service ratios, often allowing GDS and TDS ratios as high as 50%. Alternative lenders are receptive to alternate sources of income that traditional lenders cannot consider and are notably more lenient with their approach to self-employed applicants.
It is important to note that your interest rate with a B lender will be slightly higher than with an A lender. The typical range is from 3.9% to 5.99%, as you are considered an increased risk as a borrower due to your financial background. A lenders pay for your mortgage broker fees, whereas B lenders typically do not as they offer a shorter mortgage term.
Most alternative mortgages are offered as a one or two year-term, after which point you can try to graduate to an A lender. However, many borrowers remain in the B lender space permanently due to income issues or poor credit history and happily continue to make their mortgage payments that way.
Are you looking for an alternative lending solution? Call us at 613-228-3888 today to learn about how we can assist.